Question: Use the following information to find expected return for this portfolio. State of Economy Probability of State Returns if State Occurs Stock A Stock B

Use the following information to find expected return for this portfolio.

State of Economy

Probability of State

Returns if State Occurs

Stock A

Stock B

Stock C

Stock D

Boom

40%

-15%

16%

25%

20%

Normal

30%

5%

10%

-3%

2%

Recession

30%

28%

6%

-10%

-5%

Portfolio Weights

10%

20%

30%

40%

ANSWERS:

11.20%

3.90%

8.19%

7.08%

7.30%

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